In a defeat for Deloitte & Touche and Grant Thornton, a federal judge has ruled that a class-action suit brought by investors in fraud-ridden Italian dairy firm Parmalat can proceed. The Big Four firm had argued that it could not be held responsible for the actions of its international affiliates, which are set up as legally separate and independent partnerships. In Tuesday's ruling, however, Judge Lewis Kaplan said that the plaintiffs had proven that both Deloitte and Grant Thornton had acted as principals for their Italian affiliates, both of which had, at different times, audited the books of the crooked dairy firm. The judge specifically noted that the firms market themselves as global organizations. The ruling was "devastating," according to Stuart Grant, a partner with Grant & Eisenhofer, which represents Parmalat shareholders. In addition to opening up the U.S. firms to legal action, it also calls into question the whole purpose of the independent affiliate structure, which all of the Big Four use to limit their liability. "[The judge] accepted our one-firm argument," said Robert Roseman, a partner at Spector, Roseman & Kodroff, which represents Parmalat bondholders. The decision came just a day after an Italian judge sentenced 11 people, including three former Parmalat chief financial officers, to prison terms ranging from 10 months to over two years for their part in the fraud.
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